TNAG-2961-FCO40-4240-Future-of-Hong-Kong-British-Consulate-General-building-incl-1993 — Page 57

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aspects of the official British presence in Hong Kong. We asked OED to look again at the financial calculations.

8.

OED compared the cost of building the space which would not be fully used for part of the 10 year cycle with the cost

of renting and fitting out an equivalent area in the peak years of the cycle. Their appraisal (which was forwarded to

the Treasury under cover of Mr Smith's letter of 22 June to Mr

Marr) demonstrated conclusively that it is more economical to

build as now planned than to rent for 4-5 years in the ten

year cycle (with the associated costs of setting up the

operation every ten years).

9.

We therefore consider that the present design makes sense

in policy terms and that, while there is some risk that some

space may be underutilised for part of the ten year cycle (a

maximum of 1200 sqm or 7.2% of the building in 1998, less than

6% for the bulk of the "trough" years), the option gives

significant value for money advantages over rental. OED's

comparison did not include calculations for the potential cost

of fees for a redesign of the Consulate General to eliminate

the passport operation space. The indications are that little

if anything would be saved in capital costs from such a

redesign, while considerable running costs would be incurred in renting other accomodation. Putting cost aside, the

Steering Committee noted that any redesign would cause

inevitable (and unwelcome) delays to the construction project

which would almost certainly prevent the Consulate General

from being ready for occupation on schedule (ie July 1996). That would add significantly to the pressures on our operations in Hong Kong during the transition period.

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